Musicians Oppose Bill To Cut Royalties Paid By Pandora

A large group of high profile musicians have signed an open letter to Congress urging the rejection of the Internet Radio Fairness Act, a bill that would substantially cut the royalties Pandora pays to stream music over the Internet.

Back in September, Pandora sent a letter form Pandora founder Tim Westergren to users asking them to support the measure.

This bipartisan bill will correct the incredible inequity in how different digital radio formats are treated under the law when it comes to setting royalties. The difference is quite extraordinary. In 2011, Pandora paid over 50% of our revenues in performance royalties, while SiriusXM paid less than 10%.

As a lifelong musician, I’m fully supportive of artist compensation, but this situation can’t continue. Internet radio is bringing millions of listeners back to music, and is playing the songs of tens of thousands of promising artists who would otherwise never be heard. It should be given a fair chance to succeed.

But now the musicians who benefit from those royalty payments are fighting back. The letter was organized by MusicFirst, a group organized "to ensure that performers, local musicians, music businesses and artists are compensated when their music is played both today and in the future," and SoundExchange, a non-profit performance rights organization that represents the recorded music industry.

The letter is headlined: "A Musicians' Perspective On Pandora:"

We are big fans of Pandora. That's why we helped give the company a discount on rates for the past decade.

Pandora is now enjoying phenomenal success as a Wall Street company. Skyrocketing growth in revenues and users. We celebrate that. At the same time, the music community is just now beginning to gain its footing in this new digital world.

Pandora's principal asset is the music.

Why is the company asking Congress to step in and gut the royalties that thousands of musicians rely upon? That's not fair and that's not how partners work together.

Congress has many pressing issues to consider, but this is not one of them. Let's work this out as partners and continue to bring fans the great musical experience they right expect.

The letter is signed by a host of high profile artists from across the musical spectrum: Katie Perry, Sheryl Crow, Rihanna, Pink Floyd, Blondie, Bill Joel, Amy Grant, Megadeth, CeeLo Green, Ted Nugent and the Dead Kennedys. To name a few. (Amy Grant and Megadeth, that would be an interesting double bill.)

Reuters notes that the letter will be published this weekend in Billboard, the music industry trade magazine.

Back in September, BTIG analyst Richard Greenfield asserted that the Internet Radio Fairness Act is basically "crazy," and simply is designed to fix Pandora's flawed business model. "Pandora is effectively asking the government to intervene and reduce its cost structure, helping it remain a viable business because it knows its business model only works while running limited advertising," he wrote at the time. "Why should the U.S. government allow musicians to be harmed simply to help Pandora and its investors generate enhanced returns?"

Anyway, Pandora is a lot of things, but it certainly isn't "enjoying phenomenal success as a Wall Street company."

In fact, the stock today is trading right about it's all-time low. The stock, which came public in June 2011 at $16 a share, today is down 27 cents, or 3.5%, to $7.39.

Here's a copy of the letter; click the image to expand:

After a long career at Barron's, I joined Forbes as San Francisco bureau chief in December 2010. I've been writing about technology and investing for more than 25 years. With the Tech Trade, I've picked up where I left off when I was writing the Tech Trader Daily blog at Bar...